Morgan Stanley's German head offers resignation-sources

June 24, 2012|Reuters

By Philipp Halstrick and Edward Taylor

FRANKFURT, June 24 (Reuters) - The head of Morgan Stanley's German unit has offered to step down following an uproarover emails he reportedly exchanged with a regional politician,and the bank has not yet decided whether to accept hisresignation, according to two people familiar with the matter.

The departure of Dirk Notheis would be a blow for the U.S.investment bank, which had come to rely heavily on him todeliver lucrative advisory roles in mergers and acquisitions,known as mandates.

The 44-year-old Notheis is one of Germany's best-connecteddealmakers with close ties to Berlin, a fact that rivals say hashelped Morgan Stanley snare mandates involving companies thatare partially state-owned.

Emails published in the German newspapers FrankfurterAllgemeine Zeitung and Handelsblatt in the past week suggestNotheis gave strategic advice on moves by politicians in a waythat has drawn sharp public criticism. The emails were notindependently verified by Reuters.

In some of the emails, he appears to ask to keep GermanChancellor Angela Merkel - whom he refers to as Mutti, Germanfor "mom" - out of the loop until just before a controversialdeal to nationalise an energy utility was completed in 2010.

Morgan Stanley declined to comment.

The correspondence highlights the delicate and often cosynature of relationships among senior bankers and politiciansnegotiating multibillion-euro deals involving public-sectorassets.

Notheis got into hot water over his emails to Stefan Mappus,then the premier of Baden-Wuerttemberg, when the southern Germanstate was seeking to buy a 45 percent stake in local utilityprovider EnBW from French utility EDF.

Notheis and Mappus are members of the Christian DemocraticUnion (CDU), the same political party as Angela Merkel.

Baden-Wuerttemberg eventually bought the EnBW stake inDecember 2010 for about 4.7 billion euros. ButBaden-Wuerttemberg has since launched a probe into the deal andsued EDF, arguing they overpaid for the stake to the tune of 2billion euros.

Morgan Stanley provided the emails to Baden-Wuerttemberg, aspart of a probe into the deal.

Since the correspondence was published, Notheis has become atarget of criticism among some Berlin politicians.

Frank Schaeffler, the parliamentary finance spokesman forGermany's Free Democratic Party said, "This is scandalousconduct by an investment bank. The morals and ethics of theentire industry are being damaged with actions like these."

Morgan Stanley has won some big mandates from Berlin underNotheis, who at one point took a break from banking to helpraise campaign finance for Merkel's CDU party.

So far this year, Morgan Stanley ranks second in Europe,behind Goldman Sachs in terms of the value ofmerger-and-acquisitions deals in which it was involved,according to Thomson Reuters data. In Germany, the New Yorkinvestment bank ranks second behind Deutsche Bank andahead of Goldman.

Germany retains a 15 percent equity stake in DeutscheTelekom, a 25 percent stake in Commerzbank and a 30.5 percentstake in Deutsche Post.

Emails from 2010 appear to show Notheis giving advice toMappus about how to limit time for political debate aboutre-nationalising EnBW.

"Call a confidential meeting at the state ministry withthree politicians but without the supervisory board chairman,initially without giving a reason," said one of Notheis' emailsto Mappus, as published in German daily Handelsblatt.

Merkel's assistance will be needed to help persuade theFrench to sell, and Mappus should meet with French premierNicolas Sarkozy in person, Notheis said, adding, "Ask Mutti ifshe can arrange that," according to the published emails.

Because nationalization of assets is a tough sell amongfree-market politicians, Notheis advised Mappus to find externalendorsement, according to the emails.

"Ideally find a renowned economist who thinks its a goodthing. It should be somebody who owes you a favour," accordingto the emails published in Handelsblatt.

He also advised Mappus not to get a second opinion. "You'regoing to get calls from numerous bankers. They will urge you togive them a mandate. You have to turn all of them down and tellthem you are all set for advisers. And please pull this off.Otherwise it just causes sand in the gearbox and I really can'tdeal with that right now."

Notheis, who has been head of Morgan Stanley's German andAustrian operations, was named chief in February 2009, when hewas 40 years old.